On A Strong Pitch - TRF

TRF formed a part of our recommendations in the Choice Scrip column in Issue 15 Dated July 7, 2008. It was recommended at a price of Rs 639.90. What made us recommend this counter to the investors is the company’s consistent performance, management’s vision 2013 whereby it aims to grow by more than five times, improved margins, good order book position, better cost management, consistent dividend track record and last but not the least, the valuations, which were quite attractive at that point of time. Post-recommendation the counter did go up and touched a high of Rs 856.60 giving an overall appreciation of 33.84 per cent over the recommended price of Rs 639.90. However, currently it is trading at Rs 233 and is down 63.59 per cent. Thus considering this performance the stock hasn’t performed as per our expectation.

What has spoiled the party for the investors is the ‘below the expectations’ results from TRF. In H1FY09, TRF’s topline grew by 11.61 per cent to Rs 150.63 crore (134.95 crore), while the bottomline during the same period grew at 33.57 per cent to Rs 14.92 crore (Rs 11.17 crore), excluding the extraordinary income of Rs 10 crore. Though this might look good, TRF’s project division revenues have declined by 7.29 per cent, which is a matter of concern. Other than that the product division has done well. The company still has good order backlog of around Rs 1,000-1,200 crore. This gives good revenue visibility for the company in the coming years. Hence, despite the fact that it has corrected sharply, investors can still continue to hold this scrip for long term as one can expect recovery as soon as the market stabilises.